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Jamie Dimon's letter to shareholders: 'We assume that it will include a bad recession'

JPMorgan Chase CEO Jamie Dimon says “there should have been a pandemic playbook” to tackle the COVID-19 crisis, and explains that the lack of preparation is part of a larger set of problems the country is facing. Yahoo Finance’s Julia La Roche joins the On The Move panel to discuss.

Video Transcript

- Welcome back to Yahoo Finance on this Monday, April 6. Dow is still up a little bit over 1,000 points. Want to talk to you about the banks and where they stand. And one of the people who does that for us is Julia La Roche, especially after what we saw from Jamie Dimon in his letter to shareholders about maybe having to suspend dividends. What do you take from this, Julia?

JULIA LA ROCHE: Well Adam, Jamie Dimon's letter is the must read Wall Street CEO letter. Aside from maybe Warren Buffett's annual letter from Berkshire Hathaway, which Warren Buffett is an avid reader of the Jamie Dimon letter. It was 23 pages, and I don't think his intention, if you were going back even like a month ago, was to write about the coronavirus COVID-19 crises, but that was pretty much the scope of the entire letter. Normally he'll touch upon a whole different gamut of issues and topics.

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One of the big takeaways you were just mentioning-- the possibility of suspending the buyback. Basically at this point Jamie Dimon is essentially saying that at a minimum we're going to have a bad recession. No one knows exactly how long it might be, how long the recovery might be, how fast it might be, those sorts of things. But they did run some scenarios at JP Morgan, specifically an extremely adverse scenario pointing, out that JP Morgan would be fine, it would be OK in the event that GDP fell 35% in the second quarter lasting through the end of the year and you had an unemployment spike to 14% by the end of the year. That they would still be OK from a liquidity standpoint.

But in that scenario, they would probably, the board-- and he's a member of the board, he's the chairman of the board-- would suspend the dividend.

Now, they have already suspended share buybacks. We've talked about this in the last couple weeks about a lot of companies were spending millions, billions really, on stock buybacks. At this point they have suspended that. He called that the prudent thing to do. He says, look, we've always been serious about stress testing and run an enormous number of tests per week, so we are prepared for most crises. But as often is the case, this actual new crisis, while it shares attributes to what is being stress tested, is dramatically different from what they might expect. They can't even pinpoint exactly the severity of what this might look like.

Elsewhere in the letter he talked about basically the US has not prepared for the pandemic that we're seeing. That the pandemic playbook, we don't have one at this point. We didn't have one. There should have been one. And it's not just not being prepared for a pandemic-- there are a lot of issues that the US needs to address, and they need to address them now. He went on to provide a laundry list of items.

And keep in mind Jamie Dimon's, a really outspoken CEO. He pointed to a lot of flaws in the US, besides not being prepared for the pandemic. It could be education, infrastructure, those sorts of things. And we need to fix those, because you have to have-- the economy is contingent upon these things that things being fixed.

- Julia La Roche has not only written about JP Morgan Chase-- unfortunately we're out of time-- but you can read her article about the Jeffries CEO rich Handler. And here's a tease for you, quote, "the world sucks right now, my friends." His words, not Julia's or mine.